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E Q: Right, the claim would have been closed and no payment would have been made, correct? A: I believe that would be true. Now, these are pretty simple concepts that really can’t be disputed. After all, no adjuster is going to say that he/she does not want their policyholder to believe them. The reason I ask these questions is because if you get to the second phase, the jury will necessarily have found that the conduct was malicious, oppressive or fraudulent. During that time, you will be able to ask the jury the rhetorical question, “What would have happened if my client just believed and trusted their insurance company?” Well, the answer comes from the defendant’s own witnesses: your client would have been cheated out of money they deserved.
Establishing ratification
In order to get to a second, punitive damage phase, you will need to prove that the conduct constituted “malice, oppression, or fraud” in phase I. (See, CACI 3946.) In addition, you will also need to prove one of the following: 1. That the conduct constituting malice, oppression, or fraud was committed by one or more officers, directors, or managing agents of defendant who acted on behalf of the defendant; or 2. That the conduct constituting malice, oppression, or fraud was authorized by one or more officers, directors, or managing agents of defendants; or 3. That one or more officers, directors, or managing agents of defendant knew of the conduct constituting malice, oppression, or fraud and adopted or approved that conduct after it occurred.” Going into trial, you need to identify the witness or witnesses that have the managerial capacity to establish ratification. In most cases it is either the immediate supervisor of the adjuster or that person’s supervisor. Whoever the witness is, you need to establish ratification of the conduct in order to get to a second, punitive damage phase. On cross-examination of the supervisor, you will want to first establish that given his/her role in the company, he/she 68 — The Advocate Magazine
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has managerial capacity. Once that is established, you need to confirm ratification and approval of the claim. I usually ask questions like the following: * “Sir, there is nothing that you thought the company did wrong in handling this claim, is that true?” * “As the supervisor, you approve of the manner in which this claim was handled?” * “In fact, this claim was handled in the manner in which the company strives to handle claims, is that true?” * “There were no changes made to the company’s claim-handling guidelines as a result of this claim, is that true?” * “Any other insured of this company could expect to receive the same treatment that my client received in this claim, is that true?” *”No one was reprimanded for work they did on this file, is that true?” These questions establish not only ratification but also pattern and practice. Inevitably, in phase I, the company and its witnesses will vigorously defend their conduct and stand behind it. Of course, if the jury finds that the same conduct was malicious, oppressive or fraudulent and there is a second phase, this testimony will be very helpful to address the amount of punitive damages the jury should award.
The phase II trial
Trying cases is kind of like being in a boxing match. You’re fighting every day and whether you think it’s going well or not, you just don’t know if you’re ahead or behind on the jury’s scoring card. That’s why, like a boxer, no matter if you’ve had a good or bad day in trial, you shake it off and go into the next day to fight again. But all of that changes when the jury has made a finding of malice, oppression or fraud and you find yourself now in phase II of the bifurcated trial. My partner and mentor, Mike Bidart, taught me early on that when you get to the second phase, you have to remember that the jury is on your side and has found, by clear and convincing evidence, that the insurance company’s conduct was
“despicable” or fraudulent. So, as Mike said to me, your demeanor needs to be like the heavyweight champion who is being interviewed after defending his title. You no longer need to be the aggressive fighter who is zealously arguing every issue. The jury has already found that the conduct is really bad, now it’s the time to calmly reason with the jury about what to do about it. I remind the jury that we are doing this collectively, on behalf of society, to make sure this bad conduct is both punished, and more importantly, not repeated. • Phase II opening statement Phase II is really a mini trial in itself. Accordingly, I always give a short opening statement before the beginning of the second phase. Contrary to a lot of other lawyers, I’m not big on thanking the jurors, even after they have ruled in my client’s favor on phase I. I’m not really sure why I don’t like it but maybe it’s because I’ve served on two juries myself and when the lawyer constantly thanked us during closing argument I just thought it was patronizing. So instead, I jump right into the purpose of the second phase. I will start off by saying something like this: Ladies & gentlemen, we have now completed phase I of this case with your verdict. As I stated, the purpose of the first phase was to compensate my client, and you’ve now done that. But we now leave my client, and the focus is now 100 percent on the defendant and its conduct. The purpose of this second, and most important, phase is to determine what we as a society are going to do about punishing this conduct, and making sure that it doesn’t happen again. And this is a very, very serious and solemn proceeding. You have found the conduct of this company to amount to malice, oppression and fraud by clear and convincing evidence. That is the highest form of misconduct you can find in a civil case like this so, as you can imagine, this is a very serious proceeding to determine the appropriate punishment for this conduct.
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